In the latest chapter of a public battle showing no signs of letup, Papa John is suing Papa John’s. John Schnatter, the pizza chain’s founder and recently ousted chairman of the board, filed a lawsuit Thursday in Delaware Chancery Court asking to inspect company documents stemming from Papa John’s treatment of Schnatter since the publication “of a story that falsely accused him of using a racial slur.”
According to CNN Money, Papa John’s said the lawsuit was “needless and wasteful,” and was “saddened and disappointed” by the action. The company said it plans to give Schnatter all of the materials he’s entitled to as a director of Papa John’s.
"We will not let his numerous misstatements in the complaint and elsewhere distract us from the important work we are doing to move the business forward," Papa John’s said, per CNN Money.
The lawsuit claims the documents sought will show if Papa John’s board “planned this coup in advance,” and if they truly acted without adequate information, as Schnatter has suggested in the past. It will help Schnatter discover, the claim said, if directors were “grossly negligent or are acting in bad faith, or both.”
Schnatter wants to be able to inspect the books at records at Papa John’s since he claims to have “unfettered rights” to do so. One of Schnatter’s attorneys, Garland Kelley, said they’re seeking communications between board members and lawyers.
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This follows Papa John’s preemptive move to approve a so-called “poison pill provision” intended to keep Schnatter from gaining more control of the company. It lays out conditions that will dilute the value of Papa John’s stocks should any party attempt to acquire 15 percent or more of common shares. Such an action would open the door for shareholders to purchase additional stocks at a discount, thus decreasing each individual share’s value. Schnatter owns 29 percent of the chain’s stock. If his shares bump up to 31 percent or greater, he forfeits that exemption. According to the statement issued Sunday, the rights plan is meant to “protect the interests of the company and its stockholders by reducing the likelihood that any person or group gains control of Papa John’s through open market accumulation or other tactics without paying an appropriate control premium.” It will remain in place until July 22, 2019.
Schnatter sent a letter to Papa John’s directors the previous Saturday expressing regret over his decision to step down as executive chairman on July 11. The move was prompted by a Forbes report that said Schnatter used a racial slur during a May conference call with marketing agency Laundry Service. Schnatter later accused the agency of trying to extort him for $6 million.
“The board asked me to step down as chairman without apparently doing any investigation. I agreed, though today I believe it was a mistake to do so. I will not allow either my good name or the good name of the company I founded and love to be unfairly tainted,” Schnatter said in the letter.
Papa John’s removed Schnatter from its marketing materials and terminated a sublease agreement granting him access to its company corporate headquarters. It also “specifically requested” that Schnatter cease all media appearances, and not make any further statements to the media regarding the company, its business or employees.